FUTURE BANK OF BARODA Accounting Policy

The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory/ Reserve Bank of India (RBI) guidelines, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

2 USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilites (including contingent liabilites) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods unless otherwise stated.

3 INVESTMENTS

3.1 Classification

The Investment portfolio of the Bank is classified, in accordance with the Reserve Bank of India guidelines, into:

a. “Held to Maturity” (HTM) comprising Investments acquired with the intention to hold them till maturity.

b. “Held for Trading” (HFT) comprising Investments acquired with the intention to trade.

c. “Available for Sale” (AFS) comprising Investments not covered by (a) and (b) above i.e. those which are acquired neither for trading purposes nor for being held till maturity.

3.2 Acquisition Cost

Cost of acquisition of Investments is net of incentives and front-end fees.

3.3 Basis of Valuation

Investments classified as HTM are carried at weighted average acquisition cost unless it is more than the face value, in which case the premium is amortized over the period remaining to maturity.

Investments classified as HTM includes debentures / bonds, which are deemed to be in the nature of / treated as advances (for which provision is made by applying the RBI prudential norms of assets classification and provisioning applicable to Advances).

Investments in Regional Rural Banks, Treasury Bills, Commercial Papers and Certificates of Deposit, have been valued at carrying cost.

Investments in subsidiaries and joint ventures (both in India and abroad) are valued at acquisition cost less diminution, other than temporary in nature.

Bank’s investments in units of VCFs made after 23.08.2006 are classified under HTM category for initial period of three years and are valued at cost. After period of three years from date of disbursement, it will be shifted to AFS and marked-to-market as per RBI guidelines.

Investments classified as HFT and AFS are marked to market scrip-wise and the resultant net depreciation if any, in each category disclosed in the Balance Sheet, is recognized in the Profit and Loss Account, while the net appreciation, if any, is ignored. However, Depreciation on the instruments acquired by way of conversion, whether classified as Standard or NPA, is not offset against the appreciation in any other securities held under the AFS category.

Investments made by the Bank as Primary Dealer in Treasury Bills under HFT category have been valued at carrying cost.

For the purpose of valuation of quoted investments in "Held for Trading” and “Available for Sale” categories, the market rates / quotes on the Stock Exchanges, the rates declared by Fixed Income Money Market and Derivatives Association (FIMMDA) are used.

Investments for which such rates / quotes are not available are valued as per norms laid down by RBI, which are as under:

e Units of Mutual Funds - at the latest repurchase price / NAV declared by the Fund in respect of each scheme.

f Venture Capital - Declared NAV or break up NAV as per audited balance sheet which is not more than 18 months old. If NAV/ audited financials are not available for more than 18 months continuously then at Rs. 1/- per VCF.

g. Security Receipts Declared NAV by the Asset Reconstruction Company as per RBI / SEBI guidelines.

3.4 Disposal of Investments

Profit/ loss on sale of Investments classified as HTM is recognized in the Profit and Loss Account based on the weighted average cost / book value of the related Investments and an amount equivalent of profit on sale of Investments in HTM classification is appropriated to Capital Reserve Account.

Profit/ loss on sale of Investment in AFS/ HFT category is recognized in Profit and Loss Account.

3.5 The Bank is following uniform methodology of accounting for investments on settlement date basis.

3.6 In respect of investments at overseas branches, RBI guidelines or those of the host countries, whichever are more stringent are followed. In case of those branches situated in countries where no guidelines are specified, the guidelines of the RBI are followed.

3.7 The transfer of a security between these categories is accounted for at the acquisition cost / book value / market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer is fully provided for.

3.8 In respect of non-performing securities, income is not recognised, and provision is made for depreciation in the value of such securities as per RBI guidelines.

3.9 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions [including the Liquidity Adjustment Facility (LAF) with the RBI vide circular no. RBI/2016-17/FMOD. MAOG.No.116/01.01.001/2016-17 dated 10-11-2016]. Repo and Reverse Repo Transactions are treated as Collaterised Borrowing / Lending Operations with an agreement to Repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investments and Securities purchased under Reverse Repo are not included in investments. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

The hedge/ non-hedge (Trading) transactions are recorded separately. Derivative contracts designated as hedges are not marked to market unless their underlying asset is marked to market. Derivative contracts classsified as hedge and where underlying is not marked to market are recorded on accrual basis. Trading derivative positions are marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any, is ignored. Income and Expenditure relating to interest rate swaps are recognized on daily basis. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure.

For the purpose of valuation, the fair value of the total swap is computed on the basis of the amount that would be receivable or payable on termination of the transactions of the swap agreements as on the Balance Sheet date. Losses arising there from, if any, are fully provided for while the profits, if any, are ignored.

Contingent Liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notified by FEDAI at the Balance Sheet date.

4 ADVANCES

4.1 Advances in India are classified as Standard, Substandard, Doubtful or Loss assets and provision for advances are made as per the Prudential Norms of the RBI. In respect of Advances made in overseas branches, Advances are classified in accordance with Prudential Norms prescribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent.

4.2 Advances are net of specific loan loss provisions, interest suspense, amount received and held in suit-filed Sundry Deposits and Claims Received.

4.3 In respect of Rescheduled / Restructured accounts, Provision for dimunition in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

4.4 In case of financial assets sold to Asset Reconstruction Company (ARC)/ Securitization Company (SC), the bank is following the guidelines issued by Reserve Bank of India. At present, the guideline followed by the Bank is that if the sale is at a price below the net book value (NBV), (i.e. Book value less provisions held) the shortfall is debited to the profit and loss account spread over a period of two years. If the sale value is higher than the NBV, excess provision is reversed to profit & loss account in the year the amounts are received.

5 FIXED ASSETS

5.1 Premises and other Fixed Assets are stated at historical cost except revalued premises which are stated at revalued amount. The appreciation on revaluation is credited to Capital Reserve and the depreciation provided thereon is deducted therefrom.

5.2 Premises include land and building under construction.

6 RESERVES AND SURPLUS

Revenue and other Reserves include Statutory Reserves created by foreign branches as per applicable locallaws of the respective countries.

7 REVENUE RECOGNITION

7.1 Income (other than item referred in Paragraph 7.2)1 expenditure is generally recognised on accrual basis. In case of foreign offices, income/ expenditure is recognised as per the local laws of the country in which the respective foreign office is located.

7.2 Income by way of Fees, Commission other than on Government business, Commission on Guarantees, Letter of Credits, Exchange and Brokerage and Interest on Advance Biils are accounted for on realisation basis. Dividend on shares in Subsidiaries, joint ventures and associates is accounted on realisation basis.

7.3 In view of uncertainty of collection of income in cases of Non-performing Assets/Investments, such income is accounted for only on realisation in terms of the RBI guidelines.

7.4 Lease payments including cost escalation for assets taken on operating lease are recognised in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

8 EMPLOYEE BENEFITS

8.1 PROVIDENT FUND

Provident fund is a statutory obligation as per Bank of Baroda PF Rules as the Bank pays fixed contribution at pre-determined rates.The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Bank of Baroda Provident Fund Trust.

8.2 GRATUITY

Gratuity liability is a statutory obligation as per Bank of Baroda Gratuity Fund Rules and Regulations and is provided for on the basis of an actuarial valuation made at the end of the financial year. The gratuity liability is funded by the bank and is managed by Bank of Baroda Gratuity Fund Trust.

8.3 PENSION

8.3.1 Pension liability is a defined benefit obligation under Bank of Baroda Employees Pension Regulations 1995 and is provided for on the basis of actuarial valuation made at the end of the financial year, for the employees who have joined Bank up to 31.03.2010 and opted for pension. The pension liability is funded by Bank of Baroda (Employees) Pension Fund Trust.

8.3.2 New Pension Scheme which is applicable to employees who joined bank on or after

01.04.2010 is a defined contribution scheme, Bank pays fixed contribution at pre determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account.

8.4 COMPENSATED ABSENCES

Accumulating compensated absences such as Privilege Leave and unavailed sick leave are provided for based on actuarial valuation.

8.5 OTHER EMPLOYEE BENEFITS

Other Employee benefits such as Leave Encashment, Leave Fare Concession and Additional Retirement Benefit on Retirement are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.

9 DEPRECIATION

9.1 Depreciation on Fixed Assets in India [other than those referred in Paragraph 9.3 and 9.4] is provided on the written down value method in accordance with Schedule II to the Companies Act, 2013, except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

9.2 Depreciation on Fixed Assets outside India [other than those referred to in Para 9.3 below] is provided as per local laws or prevailing practices of the respective territories.

9.3 Depreciation on Computers and Software forming an integral part of Computer Hardware, in and outside India is provided on Straight Line Method at the rate of 33.33% p.a., as per the guidelines of RBI. Computer software not forming part of an intergral part of hardware is charged directly to Profit and Loss Account.

9.4 Depreciation on ATMs is provided on Straight Line Method at the rate of 20% p.a.

9.5 Depreciation on additions is provided proportionately from the date of purchase/put to use.

9.6 Cost of leasehold land and leasehold improvements are amortised over the period of lease.

10 IMPAIRMENT OF ASSETS

Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS 28 (Impairment of Assets) issued by the ICAI and charged off to Profit and Loss Account.

11 FOREIGN CURRENCY TRANSACTIONS:

11.1 Accounting for transactions involving foreign exchange is done in accordance with AS 11, (The Effects of Changes in Foreign Exchange Rates), issued by the ICAI.

11.2 As stipulated in AS 11, the foreign currency operations of the Bank are classified as

a) The transactions are initially recorded on weekly average rate as advised by FEDAI.

b) Foreign Currency Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) The resulting exchange differences are recognized as income or expenses and are accounted through Profit and Loss Account. Any reversals / payment of foreign currency assets and liabilities is done at the weekly average closing rate of the preceding week and the difference between the outstanding figure and the amount for which reversal / payment is made, is reflected in Profit and Loss Account.

d) Foreign exchange spot and forward contracts outstanding as at the balance sheet date and held for trading, are marked to market at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. The MTM values thus obtained are discounted to arrive at present value of MTM. This MTM is used to revalue the spot and forward transactions on PV basis. The resulting Forward Valuation profit or loss is included in the Profit & Loss Account.

11.4 Translation in respect of Non Integral Operations

a) Assets and Liabilities are translated at the closing spot rates notified by FEDAI at the end of each quarter.

b) Foreign Exchange Spot and Forwards contingent liabilities outstanding as at the balance sheet date are translated at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities

c) Income and Expense are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account "Foreign Currency Translation Reserve” till the disposal of the net investment.

11.5 Forward Exchange Contracts

In accordance with the guidelines of FEDAI and the provisions of AS 11, Foreign exchange spot and forward contracts outstanding as at the balance sheet date and held for trading, are revalued at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. The resulting forward valuation profit or loss is included in the Profit and Loss Account.

12 TAXES ON INCOME

This comprise of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS 22 (Accounting for taxes on Income) issued by ICAI. Deferred tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the income statement in the period of enactment of the change.

13 EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in accordance with the AS 20 (Earnings Per Share) issued by the ICAI. Basic earnings per equity share has been computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

14 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI, the Bank recognises provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.

Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

1 BASIS OF PREPARATION

The financial statements have been prepared under the historical cost
convention unless otherwise stated. They conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprises statutory
provisions, regulatory/ Reserve Bank of India (RBI) guidelines,
Accounting Standards/ guidance notes issued by the Institute of
Chartered Accountants of India (ICAI) and the practices prevalent in
the banking industry in India. In respect of foreign offices, statutory
provisions and practices prevailing in respective foreign countries are
complied with.

2 USE OF ESTIMATES

The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amount of assets
and liabilities (including contingent liabilities) as of date of the
financial statements and the reported income and expenses for the
reporting period. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates. Any revision to the
accounting estimates is recognized prospectively in the current and
future periods unless otherwise stated.

3 INVESTMENTS

3.1 Classification

The Investment portfolio of the Bank is classified, in accordance with
the Reserve Bank of India guidelines, into:

a. "Held to Maturity" (HTM) comprising Investments acquired with the
intention to hold them till maturity.

b. "Held for Trading" (HFT) comprising Investments acquired with the
intention to trade.

c. "Available for Sale" (AFS) comprising Investments not covered by
(a) and (b) above i.e. those which are acquired neither for trading
purposes nor for being held till maturity.

3.2 Acquisition Cost

Cost of acquisition of Investments is net of incentives, front- end
fees and commission.

3.3 Basis of Valuation

Investments classified as HTM are carried at weighted average
acquisition cost unless it is more than the face value, in which case
the premium is amortized over the period remaining to maturity.

Investments classified as HTM includes debentures / bonds, which are
deemed to be in the nature of / treated as advances (for which
provision is made by applying the RBI prudential norms of assets
classification and provisioning applicable to Advances).

Investments in Regional Rural Banks, Treasury Bills, Commercial Papers
and Certificates of Deposit, have been valued at carrying cost.

Investments in subsidiaries and joint ventures (both in India and
abroad) are valued at acquisition cost less diminution, other than
temporary in nature.

Bank''''s investments in units of VCFs made after 23.08.2006 are
classified under HTM category for initial period of three years and are
valued at cost. After period of three years from date of disbursement,
it will be shifted to AFS and marked-to- market as per RBI guidelines.

Investments classified as HFT and AFS are marked to market scrip-wise
and the resultant net depreciation if any, in each category disclosed
in the Balance Sheet, is recognized in the Profit and Loss Account,
while the net appreciation, if any, is ignored. However, Depreciation
on the Instruments acquired by way of conversion, whether classified as
Standard or NPA, is not offset against the appreciation in any other
securities held under the AFS category.

Investments made by the Bank as Primary Dealer in Treasury Bills under
HFT category have been valued at carrying cost.

For the purpose of valuation of quoted investments in "Held for
Trading" and "Available for Sale" categories, the market rates / quotes
on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) / Foreign Exchange Dealers Association of India
(FEDAI) are used.

Investments for which such rates / quotes are not available are valued
as per norms laid down by RBI, which are as under:

e Units of Mutual - at the latest repurchase price / NAV Funds declared
by the Fund in respect of each scheme.

f Venture Capital - Declared NAV or break up NAV as per audited balance
sheet which is not more than 18 months old. If NAV/ audited financials
are not available for more than 18 months continuously then at Re. 1/-
per VCF

g. Security Receipts Declared NAV by the Asset Reconstruction Company
as per RBI / SEBI guidelines

3.4 Disposal of Investments

: Profit/ loss on sale of Investments classified as HTM is - recognized
in the Profit and Loss Account based on the weighted average cost /
book value of the related Investments and an amount equivalent of
profit on sale of Investments f in HTM classification is appropriated
to Capital Reserve Account.

Profit/ loss on sale of Investment in AFS/ HFT category is recognized
in Profit and Loss Account.

3.5 The Bank is following uniform methodology of accounting for
investments on settlement date basis.

3.6 In respect of investments at overseas branches, RBI f guidelines or
those of the host countries, whichever are more stringent are followed.
In case of those branches situated in countries where no guidelines are
specified, the guidelines of the RBI are followed.

3.7 The transfer of a security between these categories is accounted
for at the acquisition cost / book value / market value on the date of
transfer, whichever is the least, and the depreciation, if any, on such
transfer is fully provided for.

3.8 In respect of non-performing securities, income is not recognized,
and provision is made for depreciation in the value of such securities
as per RBI guidelines.

3.9 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the
RBI for accounting of market Repo and Reverse Repo transactions [other
than the Liquidity Adjustment Facility (LAF) with the RBI]. Repo and
Reverse Repo Transactions are treated as Collaterised Borrowing /
Lending Operations with an agreement to Repurchase on the agreed terms.
Securities sold under Repo are continued to be shown under investments
and Securities purchased under Reverse Repo are not included in
investments. Costs and revenues are accounted for as interest
expenditure / income, as the case may be.

Securities purchased / sold under LAF with RBI are debited / credited
to investment Account and reversed on maturity of the transaction.
Interest expended / earned thereon is accounted for as expenditure /
revenue.

3.10 Derivatives

The Bank presently deals in interest rate and currency derivatives. The
interest rate derivatives dealt with by the Bank are Rupee Interest
Rate Swaps, Foreign Currency Interest Rate Swaps and forward rate
agreements. Currency Derivatives dealt with by the Bank are Options and
Currency swaps.

Based on RBI guidelines, Derivatives are valued as under:

The hedge/ non-hedge(market making) transactions are recorded
separately. Derivative contracts designated as hedges are not marked to
market unless their underlying asset is marked to market. Trading
derivative positions are marked-to-market (MTM) and the resulting
losses, if any, are recognized in the Profit and Loss Account. Profit,
if any, is ignored. Income and Expenditure relating to interest rate
swaps are recognized on the settlement date. Gains/ losses on
termination of the trading swaps are recorded on the termination date
as income/ expenditure.

For the purpose of valuation, the fair value of the total swap is
computed on the basis of the amount that would be receivable or payable
on termination of the transactions of the swap agreements as on the
Balance Sheet date. Losses arising there from, if any, are fully
provided for while the profits, if any, are ignored.

Contingent Liabilities on account of derivative contracts denominated
in foreign currencies are reported at closing rates of exchange
notified by FEDAI at the Balance Sheet date.

4 ADVANCES

4.1 Advances in India are classified as Standard, Sub- standard,
Doubtful or Loss assets and provision for advances are made as per the
Prudential Norms of the RBI. In respect of Advances made in overseas
branches, Advances are classified in accordance with Prudential Norms
prescribed by the RBI or local laws of the host country in which
advances are made, whichever is more stringent.

4.2 Advances are net of specific loan loss provisions, interest
suspense, amount received and held in suit-filed Sundry Deposits and
Claims Received.

4.3 In respect of Rescheduled / Restructured accounts, Provision for
diminution in fair value of restructured advances is measured in net
present value terms as per RBI guidelines.

4.4 In case of financial assets sold to Asset Reconstruction Company
(ARC)/ Securitization Company (SC), the bank is following the
guidelines issued by Reserve Bank of India. At present, the guideline
followed by the Bank is that if the sale is at a price below the net
book value (NBV), (i.e. Book value less provisions held) the shortfall
is debited to the profit and loss account spread over a period of two
years. If the sale value is higher than the NBV, excess provision is
reversed to profit & loss account in the year the amounts are received.

5 FIXED ASSETS

5.1 Premises and other Fixed Assets are stated at historical cost
except revalued premises which are stated at revalued amount. The
appreciation on revaluation is credited to Capital Reserve and the
depreciation provided thereon is deducted there from.

5.2 Premises include land and building under construction.

6 RESERVES AND SURPLUS

Revenue and other Reserves include Statutory Reserves created by
foreign branches as per applicable local laws of the respective
countries.

7 REVENUE RECOGNITION

7.1 Income (other than item referred in Paragraph 7.2)/ expenditure is
generally recognized on accrual basis. In case of foreign offices,
income/ expenditure is recognized as per the local laws of the country
in which the respective foreign office is located.

7.2 Income by way of Fees, Commission other than on Government
business, Commission on Guarantees, Letter of Credits, Exchange and
Brokerage and Interest on Advance Biils are accounted for on
realization basis. Dividend on shares in Subsidiaries, joint ventures
and associates is accounted on realization basis.

7.3 In view of uncertainty of collection of income in cases of
Non-performing Assets/Investments, such income is accounted for only on
realization in terms of the RBI guidelines.

7.4 Lease payments including cost escalation for assets taken on
operating lease are recognized in the Profit and Loss Account over the
lease term in accordance with the AS 19 (Leases) issued by ICAI.

8 EMPLOYEE BENEFITS

8.1 PROVIDENT FUND

Provident fund is a statutory obligation as per Bank of Baroda PF Rules
as the Bank pays fixed contribution at pre- determined rates. The
obligation of the Bank is limited to such fixed contribution. The
contributions are charged to Profit and Loss Account. The fund is
managed by Bank of Baroda Provident Fund Trust.

8.2 GRATUITY

Gratuity liability is a statutory obligation as per Bank of Baroda
Gratuity Fund Rules and Regulations and is provided for on the basis of
an actuarial valuation made at the end of the financial year. The
gratuity liability is funded by the bank and is managed by Bank of
Baroda Gratuity Fund Trust.

8.3 PENSION

8.3.1 Pension liability is a defined benefit obligation under Bank of
Baroda Employees Pension Regulations 1995 and is provided for on the
basis of actuarial valuation made at the end of the financial year, for
the employees who have joined Bank up to 31.03.2010 and opted for
pension. The pension liability is funded by Bank of Baroda (Employees)
Pension Fund Trust.

8.3.2 New Pension Scheme which is applicable to employees who joined
bank on or after 01.04.2010 is a defined contribution scheme, Bank pays
fixed contribution at pre determined rate and the obligation of the
Bank is limited to such fixed contribution. The contribution is charged
to Profit and Loss Account.

8.4 COMPENSATED ABSENCES

Accumulating compensated absences such as Privilege Leave and unveiled
sick leave are provided for based on actuarial valuation.

8.5 OTHER EMPLOYEE BENEFITS

Other Employee benefits such as Leave Encashment, Leave Fare Concession
and Additional Retirement Benefit on Retirement are provided for based
on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of
employees other than those on deputation are valued and accounted for
as per laws prevailing in the respective territories.

9 DEPRECIATION

9.1 Depreciation on Fixed Assets in India [other than those referred in
Paragraph 9.3 and 9.4] is provided on the written down value method in
accordance with Schedule II to the Companies Act, 2013, except in case
of revalued assets, in respect of which higher depreciation is provided
on the basis of estimated useful life of these revalued assets.

9.2 Depreciation on Fixed Assets outside India [other than those
referred to in Para 9.3 below] is provided as per local laws or
prevailing practices of the respective territories.

9.3 Depreciation on Computers and Software forming an integral part of
Computer Hardware, in and outside India is provided on Straight Line
Method at the rate of 33.33% p.a., as per the guidelines of RBI.
Computer software not forming part of an intergral part of hardware is
charged directly to Profit and Loss Account.

9.4 Depreciation on ATMs is provided on Straight Line Method at the
rate of 20% p.a.

9.5 Depreciation on additions is provided proportionately from the date
of purchase/put to use.

9.6 Cost of leasehold land and leasehold improvements are amortized
over the period of lease.

10 IMPAIRMENT OF ASSETS

Impairment losses (if any) on Fixed Assets (including revalued assets)
are recognized in accordance with AS 28 (Impairment of Assets) issued
by the ICAI and charged off to Profit and Loss Account.

11 FOREIGN CURRENCY TRANSACTIONS:

11.1 Accounting for transactions involving foreign exchange is done in
accordance with AS 11, (The Effects of Changes in Foreign Exchange
Rates), issued by the ICAI.

11.2 As stipulated in AS 11, the foreign currency operations of the
Bank are classified as a) Integral Operations and b) Non Integral
Operations. All Overseas Branches, Offshore Banking Units, Overseas
Subsidiaries are treated as Non Integral Operations and domestic
operations in foreign exchange and Representative Offices are treated
as Integral Operations.

11.3 Translation in respect of Integral Operations

a) The transactions are initially recorded on weekly average rate as
advised by FEDAI.

b) Foreign Currency Assets and Liabilities (including contingent
liabilities) are translated at the closing spot rates notified by FEDAI
at the end of each quarter.

c) The resulting exchange differences are recognized as income or
expenses and are accounted through Profit and Loss Account. Any
reversals / payment of foreign currency assets and liabilities is done
at the weekly average closing rate of the preceding week and the
difference between the outstanding figure and the amount for which
reversal / payment is made, is reflected in Profit and Loss Account.

d) Foreign exchange spot and forward contracts outstanding as at the
balance sheet date and held for trading, are marked to market at the
closing spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities. The MTM values
thus obtained are discounted to arrive at present value of MTM. This
MTM is used to revalue the spot and forward transactions on PV basis.
The resulting Forward Valuation profit or loss is included in the
Profit & Loss Account.

11.4 Translation in respect of Non Integral Operations

a) Assets and Liabilities are translated at the closing spot rates
notified by FEDAI at the end of each quarter.

b) Foreign Exchange Spot and Forwards contingent liabilities
outstanding as at the balance sheet date are translated at the closing
spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities.

c) Income and Expense are translated at quarterly average rate notified
by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or
expense for the period but accumulated in a separate account "Foreign
Currency Translation Reserve" till the disposal of the net investment.

11.5 Forward Exchange Contracts

In accordance with the guidelines of FEDAI and the provisions of AS 11,
Foreign exchange spot and forward contracts outstanding as at the
balance sheet date and held for trading, are revalued at the closing
spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities. The resulting
forward valuation profit or loss is included in the Profit and Loss
Account.

12 TAXES ON INCOME

This comprise of provision for Income tax and deferred tax charge or
credit (reflecting the tax effects of timing differences between
accounting income and taxable income for the period) as determined in
accordance with AS 22 (Accounting for taxes on Income) issued by ICAI.
Deferred tax is recognized subject to consideration of prudence in
respect of items of income and expenses those arise at one point of
time and are capable of reversal in one or more subsequent periods.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
timing differences are expected to be reversed. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in
the income statement in the period of enactment of the change.

13 EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in
accordance with the AS 20 (Earnings Per Share) issued by the ICAI.
Basic earnings per equity share has been computed by dividing net
income by the weighted average number of equity shares outstanding for
the period. Diluted earnings per equity share has been computed using
the weighted average number of equity shares and dilutive potential
equity shares outstanding during the period.

14 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets)
issued by the ICAI, the Bank recognizes provisions only when it has a
present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.

1 BASIS OF PREPARATION

The financial statements have been prepared under the historical cost
convention unless otherwise stated. They conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprises statutory
provisions, regulatory/ Reserve Bank of India (RBI) guidelines,
Accounting Standards/ guidance notes issued by the Institute of
Chartered Accountants of India (ICAI) and the practices prevalent in
the banking industry in India. In respect of foreign offices, statutory
provisions and practices prevailing in respective foreign countries are
complied with.

2 USE OF ESTIMATES

The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amount of assets
and liabilites (including contingent liabilites) as of date of the
financial statements and the reported income and expenses for the
reporting period. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates. Any revision to the
accounting estimates is recognised prospectively in the current and
future periods unless otherwise stated.

3 INVESTMENTS

3.1 Classification

The Investment portfolio of the Bank is classified, in accordance with
the Reserve Bank of India guidelines, into:

a "Held to Maturity" (HTM) comprising Investments acquired with the
intention to hold them till maturity.

b "Held for Trading" (HFT) comprising Investments acquired with the
intention to trade.

c "Available for Sale" (AFS) comprising Investments not covered by
(a) and (b) above i.e. those which are acquired neither for trading
purposes nor for being held till maturity.

3.2 Acquisition Cost

Cost of acquisition of Investments is net of incentives, front-end fees
and commission.

3.3 Basis of Valuation

Investments classified as HTM are carried at weighted average
acquisition cost unless it is more than the face value, in which case
the premium is amortized over the period remaining to maturity.

Investments classified as HTM includes debentures / bonds which are
deemed to be in the nature of / treated as advances (for which
provision is made by applying the RBI prudential norms of assets
classification and provisioning applicable to Advances).

Investments in Regional Rural Banks, Treasury Bills, Commercial Papers
and Certificates of Deposit which have been valued at carrying cost.

Investments in subsidiaries and joint ventures (both in India and
abroad) are valued at acquisition cost less diminution, other than
temporary in nature.

Bank's investments in units of VCFs made after 23.08.2006 are
classified under HTM category for initial period of three years and are
valued at cost. After period of three years from date of disbursement,
it will be shifted to AFS and marked-to-market as per RBI guidelines.

Investments classified as HFT and AFS are marked to market scrip-wise
and the resultant net depreciation if any, in each category disclosed
in the Balance Sheet, is recognized in the Profit and Loss Account,
while the net appreciation, if any, is ignored.

Investments made by the Bank as Primary Dealer in Treasury Bills under
HFT category have been valued at carrying cost.

For the purpose of valuation of quoted investments in ''Held for
Trading" and "Available for Sale" categories, the market rates /
quotes on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) / Foreign Exchange Dealers Association of India
(FEDAI) are used.

Investments for which such rates / quotes are not available are valued
as per norms laid down by RBI, which are as under:

a Government / -

Approved securities

on Yield to Maturity basis.

b Equity Shares, pSu and Trustee shares

at book value as per the latest Balance Sheet (not more than 12 months
old), otherwise Re.1 per company.

c Preference Shares

- on Yield to Maturity basis with appropriate credit spread mark-up.

d PSU Bonds

- on Yield to Maturity basis with appropriate credit spread mark-up.

e Units of Mutual Funds

- at the latest repurchase price / NAV declared by the Fund in respect
of each scheme.

f Venture Capital

- Declared NAV or break up NAV as per audited balance sheet which is
not more than 18 months old. If NAV/ audited financials are not
available for more than 18 months continuously then at Re. 1/- per VCF.

g Security Receipts

- Declared NAV by the Asset Reconstruction Company as per RBI / SEBI
guidelines.

the weighted average cost / book value of the related Investments and
an amount equivalent of profit on sale of Investments in HTM
classification is appropriated to Capital Reserve Account.

Profit/ loss on sale of Investment in AFS/ HFT category is recognized
in Profit and Loss Account.

3.5 The Bank is following uniform methodology of accounting for
investments on settlement date basis.

3.6 In respect of investments at overseas branches, RBI guidelines or
those of the host countries, whichever are more stringent are followed.
In case of those branches situated in countries where no guidelines are
specified, the guidelines of the RBI are followed.

3.7 The transfer of a security between these categories is accounted
for at the acquisition cost / book value / market value on the date of
transfer, whichever is the least, and the depreciation, if any, on such
transfer is fully provided for.

3.8 In respect of non-performing securities, income is not recognised,
and provision is made for depreciation in the value of such securities
as per RBI guidelines.

3.9 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the
RBI for accounting of market Repo and Reverse Repo transactions [other
than the Liquidity Adjustment Facility (LAF) with the RBI]. Repo and
Reverse Repo Transactions are treated as Collaterised Borrowing /
Lending Operations with an agreement to Repurchase on the agreed terms.
Securities sold under Repo are continued to be shown under investments
and Securities purchased under Reverse Repo are not included in
investments. Costs and revenues are accounted for as interest
expenditure / income, as the case may be.

Securities purchased / sold under LAF with RBI are debited / credited
to investment Account and reversed on maturity of the transaction.
Interest expended / earned thereon is accounted for as expenditure /
revenue.

3.10 Derivatives

The Bank presently deals in interest rate and currency derivatives. The
interest rate derivatives dealt with by the Bank are Rupee Interest
Rate Swaps, Foreign Currency Interest Rate Swaps and forward rate
agreements. Currency Derivatives dealt with by the Bank are Options and
Currency swaps.

Based on RBI guidelines, Derivatives are valued as under:

The hedge/ non-hedge(market making) transactions are recorded
separately. Derivative contracts designated as hedges are not marked to
market unless their underlying asset is marked to market. Trading
derivative positions are marked-to-market (MTM) and the resulting
losses, if any, are recognized in the Profit and Loss Account. Profit,
if any, is ignored. Income and Expenditure relating to interest rate
swaps are recognized on the settlement date. Gains/ losses on
termination of the trading swaps are recorded on the termination date
as income/ expenditure.

For the purpose of valuation, the fair value of the total swap is
computed on the basis of the amount that would be receivable or payable
on termination of the transactions of the swap agreements as on the
Balance Sheet date. Losses arising there from, if any, are fully
provided for while the profits, if any, are ignored.

Contingent Liabilities on account of derivative contracts denominated
in foreign currencies are reported at closing rates of exchange
notified by FEDAI at the Balance Sheet date.

4 ADVANCES

4.1 Advances in India are classified as Standard, Sub- standard,
Doubtful or Loss assets and provision for advances are made as per the
Prudential Norms of the RBI. In respect of Advances made in overseas
branches, Advances are classified in accordance with Prudential Norms
prescribed by the RBI or local laws of the host country in which
advances are made, whichever is more stringent.

4.2 Advances are net of specific loan loss provisions, interest
suspense, amount received and held in suit- filed Sundry Deposits and
Claims Received.

4.3 In respect of Rescheduled / Restructured accounts, Provision for
dimunition in fair value of restructured advances is measured in net
present value terms as per RBI guidelines.

4.4 In case of financial assets sold to Asset Reconstruction Company
(ARC)/ Securitization Company (SC), the bank is following the
guidelines issued by reserv bank of india. At present, the guideline
follwed by the bank is that if the sale is at a price below the net
book value (NBV), (i.e. Book value less provisions held) the shortfall
is debited to the profit and loss account spread over a period of two
years. If the sale value is higher than the NBV, excess provision is
reversed to profit and loss account in the year the amount are
received.

5 FIXED ASSETS

5.1 Premises and other Fixed Assets are stated at historical cost
except revalued premises which are stated at revalued amount. The
appreciation on revaluation is credited to Capital Reserve and the
depreciation provided thereon is deducted therefrom.

5.2 Premises include land and building under construction.

6 RESERVES AND SURPLUS

Revenue and other Reserves include Statutory Reserves created by
foreign branches as per applicable local laws of the respective
countries.

7 REVENUE RECOGNITION

7.1 Income (other than item referred in Paragraph 7.2)/ expenditure is
generally recognised on accrual basis. In case of foreign offices,
income/ expenditure is recognised as per the local laws of the country
in which the respective foreign office is located.

7.2 Income by way of Fees, Commission other than on Government
business, Commission on Guarantees, Letter of Credits, Exchange,
Brokerage and Interest on Advance Bills are accounted for on
realisation basis. Dividend on shares in Subsidiaries, joint ventures
and associates is accounted on realisation basis.

7.3 In view of uncertainty of collection of income in cases of
Non-performing Assets/Investments, such income is accounted for only on
realisation in terms of the RBI guidelines.

7.4 Lease payments including cost escalation for assets taken on
operating lease are recognised in the Profit and Loss Account over the
lease term in accordance with the AS 19 (Leases) issued by ICAI.

8 EMPLOYEE BENEFITS

8.1 PROVIDENT FUND

Provident fund is a statutory obligation as per Bank of Baroda PF Rules
as the Bank pays fixed contribution at pre-determined rates.The
obligation of the Bank is limited to such fixed contribution. The
contributions are charged to Profit and Loss Account. The fund is
managed by Bank of Baroda Provident Fund Trust.

8.2 GRATUITY

Gratuity liability is a statutory obligation as per Bank of Baroda
Gratuity Fund Rules and Regulations and is provided for on the basis of
an actuarial valuation made at the end of the financial year. The
gratuity liability is funded by the bank and is managed by Bank of
Baroda Gratuity Fund Trust.

8.3 PENSION

8.3.1 Pension liability is a defined benefit obligation under Bank of
Baroda Employees Pension Regulations 1995 and is provided for on the
basis of actuarial valuation made at the end of the financial year, for
the employees who have joined Bank up to 31.03.2010 and opted for
pension. The pension liability is funded by Bank of Baroda (Employees)
Pension Fund Trust.

8.3.2 New Pension Scheme which is applicable to employees who joined
bank on or after 01.04.2010 is a defined contribution scheme, Bank pays
fixed contribution at pre determined rate and the obligation of the
Bank is limited to such fixed contribution. The contribution is charged
to Profit and Loss Account.

8.4 COMPENSATED ABSENCES

Accumulating compensated absences such as Privilege Leave are provided
for based on actuarial valuation.

8.5 OTHER EMPLOYEE BENEFITS

Other Employee benefits such as Leave Encashment, Leave Fare Concession
and Additional Retirement Benefit on Retirement are provided for based
on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of
employees other than those on deputation are valued and accounted for
as per laws prevailing in the respective territories.

9 DEPRECIATION

9.1 Depreciation on Fixed Assets in India [other than those referred in
Paragraph 9.3 and 9.4] is provided on the written down value method in
accordance with Schedule II to the Companies Act, 2013, except in case
of revalued assets, in respect of which higher depreciation is provided
on the basis of estimated useful life of these revalued assets.

9.2 Depreciation on Fixed Assets outside India [other than those
referred to in Para 9.3 below] is provided as per local laws or
prevailing practices of the respective territories.

9.3 Depreciation on Computers and Software forming an integral part of
Computer Hardware, in and oustside India is provided on Straight Line
Method at the rate of 33.33% p.a., as per the guidelines of RBI.
Computer software not forming part of an intergral part of hardware is
charged directly to Profit and Loss Account.

9.4 Depreciation on ATMs is provided on Straight Line Method at the
rate of 20% p.a.

9.5 Depreciation on additions is provided proportionately from the date
of purchase/ put to use.

9.6 Cost of leasehold land and leasehold improvements are amortised
over the period of lease.

10 IMPAIRMENT OF ASSETS

Impairment losses (if any) on Fixed Assets (including revalued assets)
are recognised in accordance with AS 28 (Impairment of Assets) issued
by the ICAI and charged off to Profit and Loss Account.

11 FOREIGN CURRENCY TRANSACTIONS:

11.1 Accounting for transactions involving foreign exchange is done in
accordance with AS 11, (The Effects of Changes in Foreign Exchange
Rates), issued by the ICAI.

11.2As stipulated in AS 11, the foreign currency operations of the Bank
are classified as

a) The transactions are initially recorded on weekly average rate as
advised by FEDAI.

b) Foreign Currency Assets and Liabilities (including contingent
liabilities) are translated at the closing spot rates notified by FEDAI
at the end of each quarter.

c) The resulting exchange differences are recognized as income or
expenses and are accounted through Profit and Loss Account. Any
reversals / payment of foreign currency assets and liabilities is done
at the weekly average closing rate of the preceding week and the
difference between the outstanding figure and the amount for which
reversal / payment is made, is reflected in Profit and Loss Account.

d) Foreign exchange spot and forward contracts outstanding as at the
balance sheet date and held for trading,are marked to market at the
closing spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities. The MTM values
thus obtained are discounted to arrive at present value of MTM. This
MTM is used revalue the spot and forward transactions on PV basis. The
resulting forward valuation profit or loss is included in the Profit
and Loss Account.

11.4 Translation in respect of Non Integral Operations

a) Assets and Liabilities are translated at the closing spot rates
notified by FEDAI at the end of each quarter.

b) Foreign Exchange Spot and Forwards contingent liabilities
outstanding as at the balance sheet date are translated at the closing
spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities.

c) Income and Expense are translated at quarterly average rate notified
by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or
expense for the period but accumulated in a separate account
''Foreign Currency Translation Reserve" till the disposal of the
net investment.

11.5 Forward Exchange Contracts

In accordance with the guidelines of FEDAI and the provisions of AS 11,
Foreign exchange spot and forward contracts outstanding as at the
balance sheet date and held for trading, are revalued at the closing
spot and forward rates respectively notified by FEDAI and at
interpolated rates for contracts of interim maturities. The resulting
forward valuation profit or loss is included in the Profit and Loss
Account.

12 TAXES ON INCOME

This comprise of provision for Income tax and deferred tax charge or
credit (reflecting the tax effects of timing differences between
accounting income and taxable income for the period) as determined in
accordance with AS 22 (Accounting for taxes on Income) issued by ICAI.
Deferred tax is recognised subject to consideration of prudence in
respect of items of income and expenses those arise at one point of
time and are capable of reversal in one or more subsequent periods.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
timing differences are expected to be reversed. The effect on deferred
tax assets and liabilities of a change in tax rates is recognised in
the income statement in the period of enactment of the change

13 EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in
accordance with the AS 20 (Earnings Per Share) issued by the ICAI.
Basic earnings per equity share has been computed by dividing net
income by the weighted average number of equity shares outstanding for
the period. Diluted earnings per equity share has been computed using
the weighted average number of equity shares and dilutive potential
equity shares outstanding during the period.

14 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets)
issued by the ICAI, the Bank recognises provisions only when it has a
present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.

Contingent liability is disclosed unless the possibility of an outflow
of resouces embodying economic benefit is remote.

Contingent Assets are not recognised in the financial statements since
this may result in the recognition of income that may never be
realised.

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com